10/14/2011 2:17PM

Racing has moved on in post-OTB era


When New York City OTB suddenly shut down last Dec. 8, it was reasonable to think there might be dire repercussions for New York racing. While many believed the so-called “public benefit corporation” had done as much harm as benefit to racing during four decades of existence, it nonetheless was the nation’s largest bet-taker, handling over $800 million of a national $13 billion handle just two years ago, most of it on in-state racing at Aqueduct, Belmont, and Saratoga.

Instead, the overnight disappearance of NYCOTB has become a stunning lesson in how the distribution of racing has changed and how adaptable its customers are. There have been casualties of the closure, primarily in the loss of jobs and benefits to former OTB employees, and abandoned obligations to various racing entities, including a $20 million debt to NYRA that is never going to be paid. But in terms of the effect on racing and its customers, it was almost a non-event.

People who wanted to continue playing the horses quickly found other ways to do so, proving the complete obsolescence of the 40-year-old OTB model, and the tracks ended up getting more revenue from less overall handle by eliminating the system’s least efficient middleman. Despite the loss of $28 million in NYCOTB revenue during the first eight months of this year, NYRA showed a slight increase in gross and net wagering revenue thanks to gains in its ontrack, account-wagering, and export business.

You would think that state legislators would be breathing a sigh of relief, not only because the racing industry is stable and poised for growth with the opening of the Aqueduct racino later this year, but also because it did not bail out or prop up a failed and declining OTB business model. Instead, lawmakers are seriously entertaining the possibility of resuscitating NYCOTB and balking at the obvious next step of consolidating the state’s remaining redundant OTB companies.

At public hearings last week, called by the state senate’s Racing, Wagering and Gaming Committee, various OTB and union officials ignored the events of the last year and maintained their position that the only thing wrong with OTB is that it is forced to turn over too much money to racing and not allowed to keep more for itself. You can’t blame them for grasping at straws to save their companies’ existence, but now that the utter obsolescence of the OTB model has been so dramatically proved in the real world, their words are more hollow than ever.

For the state to revive NYCOTB or take money away from racing to allow the other OTB’s to continue without an overhaul would be the equivalent of using public funds to re-open bookstores and record shops that have fallen victim to mail-order purchases and digital downloads. In the early 1970’s, OTB parlors were necessary for people to bet on races without going to the track. That time has come and gone, and consumers now can wager from their living rooms with their choice of account-wagering providers. The idea that a state agency, much less five or six of them, is necessary to process and supervise these transactions is nothing but a bad joke in the face of current technology.

Another idea being floated at the hearings was somehow restricting New Yorkers to making their offtrack bets with in-state entities, a last-ditch attempt to preserve these outdated companies but completely impractical in today’s online world. That genie escaped the bottle long ago as state borders disappeared in the world of online commerce. You might as well tell New Yorkers they can’t buy their music from iTunes or their books from Amazon anymore but have to shop from state agencies. Good luck with that approach.

The legacy of ill will between New York racing and its OTB system continues to shadow these discussions. There are some politicians who will always believe that the tracks are elitist entities in need of greater oversight and others who believe that the OTB system was always designed to create patronage jobs rather than provide any benefit to the racing industry.

Those ancient divisions, however, are not even relevant anymore. New York racing’s astonishing recovery from the closure of NYCOTB proved that the OTB era is simply over, that the world has changed, and that the sport has found better ways of delivering its product to the market.